Debugging the Profit Motive: Part Two — Shiny Gold Coins

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Swarm Economy – Zacqary Adam Xeper

Swarm Economy – Zacqary Adam Xeper

As can be seen here, the profit motive goes both ways: not only do those in power behave badly in order to profit, but the powerless are forced to reward bad behavior (working for bad, but rich, people) in order to profit themselves. Without the profits gained from working for bad people, poor and lower-class people will wither and die, unable to afford their basic necessities. But poor people are rarely poor because they are bad people, and rich people are rarely rich because they are good people; in fact, it’s often the exact opposite, when it’s not just based on pure random luck. The distribution of shiny gold coins tends to be unjust, but it is, fortunately, just another fixable bug.

DEBUGGING THE PROFIT MOTIVE
This is an article in a series on how Zacqary proposes society might debug the profit motive. This is the second article, on the bug of shiny gold coins. The others are on the profitable bad behavior bug, and the pressure bug.

Problem: Wealth != Worth

The aforementioned Big Evil House Man is hardly an upstanding member of society. Everyone knows that his riches are ill-gotten — let’s say he made money by scamming lots of people into buying toxic toothpaste, for example. Or, even worse, maybe he’s the son of Unscrupulous Toothpaste Salesman, earned all his riches simply by being born, and then proceeded to be a massive, parasitic dick to everybody else in the world just because he could. He certainly doesn’t deserve all of those shiny gold coins, nor the power that comes with them.

When we speak of how rich a person is, we sometimes say “he’s worth $40 million,” or “she’s worth £25 million”. That, however, is the problem: society equates a person’s wealth with how much they are worth. Big Evil House Man may be wealthy, but he’s a pretty worthless human being. Wealth often doesn’t correlate with actual worth, when we base everything on how many bits of coin that somebody manages to scrounge up.

Oh, you thought I was only talking about real, physical gold coins? Bitcoin, the new cryptocurrency which everybody loves so much, is just as shiny and gold and coiny as anything else we’ve had so far. It’s probably one of the least terrible implementations of shiny gold coins yet — which is certainly great, don’t get me wrong — but is it really the future? Can’t we do any better?

Solution: Track Worth Instead of Wealth

Bitcoin is attractive as an alternative to central government-issued fiat currency because of its limited supply; governments can create new money just by adding another 0 to a spreadsheet, but with Bitcoin — as with physical commodities like gold— this isn’t possible. At the same time, it retains some of the advantages of fiat currency: it takes up no physical space, and it can be transferred instantaneously. But perhaps the problem with government-issued fiat isn’t the fact that it’s imaginary, but rather that it’s imagining the wrong thing. Instead of Bitcoin, let’s consider another recent up-and-coming alternative currency: Ripple.

Ripple, at first glance, seems to be designed to work in concert with shiny gold coins, rather than to replace them. Here’s an example of how it works:

Alice sells Bob a muffin for 4 µBTC (micro-Bitcoin — imagine this is taking place in a near-future where everyone uses Bitcoin). Instead of giving her the 4 µBTC, Bob instead opens a line of Ripple credit with Alice. He now owes her 4 µBTC. Later, Alice buys a burger from Bob for 10 µBTC. She now owes him 6 µBTC: 10 minus the 4 that Bob already owed.

The thing is, Alice and Bob trust one another to pay their debts back; they’ve both decided that they can owe one another up to 1 BTC at a time. Candice and David, on the other hand, have never met before, and can’t reasonably trust one another. So how can Candice buy a 20 µBTC shirt from David? Simple: David knows Bob, and Candice knows Alice. So the payment “ripples” through them all: David owes Bob 20, Bob owes Alice 14, and Alice owes Candice 20.

Eventually, the four of them open up lines of credit with more and more people, and those people in turn have credit lines with others. Soon, Alice, Bob, Candice, and David can ripple a payment to almost anybody in the world. The system automatically charts a path — Alice can pay Wanda by going through Bob to Fred to Rick to Victor to Nancy to Philip — and the whole process feels just like spending Bitcoin.

But then, over time, everybody starts to pay back their Bitcoin less and less. Bob wants to buy a muffin from Alice, but she owes him 50 µBTC; why bother sending the 4 µBTC when she can just owe him 46 instead? Everybody starts to trade this way, doing things for and selling things to one another, and bouncing back and forth between who owes what to whom. Soon, nobody really feels like they’re giving money to one another. Instead, they’re trading goods and services of equal value — almost like a delayed-gratification barter system.

This possible scenario is fiat money done right. Ripple credits — Bitcoin, or any other currency, would be irrelevant at this point — are backed not by the scarcity of a shiny gold coin, but by the positive actions of human beings, and their promises to do more of them. Central government-issued fiat money doesn’t deliver on its promise of being backed by, well, promise; governments can make as many promises as they like by printing more money, but individuals can’t — we’re limited by the supply of promises that our governments make. Hence, to us — the people — government fiat money works and feels like a simulation of shiny gold coins. Not so in a decentralized fiat system like Ripple.

Ripple doesn’t eliminate the perfectly rational profit motive — the motivation to gain more power, which is done by getting more money. But in order to profit in a Ripple system, you must earn the trust of your peers; the more reliably you repay your debts (not in cash, but in goods or services), the more purchasing power people will give you. You can’t just steal credit or scam people out of credit, because you’ll owe it back to them. The only way to get money is to prove yourself worthy of it — to be worth something.

Problem: Debilitating Debt

When I first heard about Ripple, it amused me greatly, as it seemed like a practical implementation of an episode of Regular Show I’d watched the day before. Here’s how it went:

“Hey Mordecai,” says Rigby the raccoon to Mordecai the blue jay, “do me a solid and get me a lemonade from the kitchen.”
“Okay,” says Mordecai. “But you owe me a solid!”
“Of course,” replies Rigby. “That’s how solids work.”

What follows is a montage of Rigby and Mordecai doing each other solids — “Do me a solid and turn this comic book page”, “Do me a solid and dry my hands”, “Do me a solid and fluff this cushion”, “Sharpen my pencil”, “Fold these socks”, “Cheese these nachos” — presumably owing them back and forth to one another after each. But then:

“Dude,” says Mordecai to Rigby, “do me a solid and go out with Eileen so I can go on a date with Margaret.” Eileen’s just invited them out to go play miniature golf with her and Margaret.
“What?” shouts Rigby. “Why?”
“Dude, come on!” replies Mordecai. “This is my chance to finally get with Margaret!”
“No!” snaps Rigby. “I’m not doin’ it!”
“What do you want? I’ll do your work for a week! You can be player one at any video game!” Mordecai pleads.
“Dude, there’s no way I’m goin’ out with Eileen,” says Rigby.
“Rigby, please!” begs Mordecai. “You have to do me this solid!”
“All right, I’ll do it,” sneers Rigby. “For ten solids.”

Rigby, of course, uses his ten solids to completely ruin Mordecai’s chances with Margaret, forcing him to do embarrassing and socially awkward things during the date. When Mordecai, at last, refuses to do Rigby’s tenth and final solid — a deliberately unrevealed extremely embarrassing act — the world literally starts falling apart. He has to horribly degrade himself, or else everyone will die. If you’d like to leave a comment on this article, please include the word “fishsticks” to prove that you’ve read this far.

On a more serious note, let’s replace Rigby with Big Evil House Man, and Mordecai with you. When a flood destroyed your home and all your possessions, you went to Big Evil House Man for a massive amount of credit — you were desperate, and didn’t know what else to do. Now, you’re essentially his slave, and none of your friends have enough credit to free you from your debt. And so you’re forced to tend his garden anyway. The shiny gold coins may be gone, but the real bug is hardly fixed.

The Real Problem: Pressure

A system like Ripple is still better than an economy based on shiny gold coins, but it still has a lot of potential for human suffering. People already get deep into debt with unscrupulous characters and forces, often without really deserving the consequences — just ask any recent college graduate in the US today trying to pay back their student loans.

But even debts owed to perfectly reasonable people can be a source of debilitating pressure, as a long-standing unpaid debt can breed resentment and contempt between the closest of friends. Is this, though, a necessary evil? After all, if my friend were indebted to me for a long time and hadn’t even come close to paying back, I’d surely have a right to be angry, and the pressure I put on my friend would absolutely be justified.

What if pressure isn’t necessary? What if it’s just another bug that needs fixing? I’ll talk about that in part three.

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About The Author: Zacqary Adam Xeper

Zacqary is an activist in the New York Pirate Party, where his official title is "Cat Herder." He is an open source game developer, and the Chief Executive Plankhead of Plankhead, a free culture arts collective. Despite believing that money is a superfluous social construct, he has a Gittip profile.

I intuit something wrong with this article, perhaps the assumption that rich people are generally bad. I seem to fail to see how that can be the case in a developed society with a working justice system and no government privileges granted to particular companies or individuals.

If there’s nothing but the market between you and your customers, I don’t see how bad people could succeed by cheating and lying their way to wealth. The justice system is there to enforce agreements and contracts, and well, justice. Misdeeds do not go unchecked. We sort of have this already. There are other cases where our current state of affairs is far from desirable, but these are generally due to some sort of special privilege or waiver extended from the government to certain groups. Look at intellectual property, for example, or import taxes. They benefit the few while hurting the many. But further from that I seriously doubt someone could get by selling poisoned toothpaste or a similar product in modern Europe or the US.

If you abide by market rules, and receive no government grant, privilege or waiver, and become rich, it can be assumed that your wealth have been rightfully earned. You have participated in voluntary exchange of goods, or services, you have probably provided jobs and paid salaries, while treating your employees properly in a way that they’ve decided to stay working for you voluntarily. You probably had to compete against other market players in terms of quality, or price. If you succeeded, well, I can only wish you enjoy your wealth.

If on the other side, you cheat, lie, and somewhat have strong ties with the authorities, so you find a way to avoid being caught. If you enjoy government-granted privileges, like intellectual property, and you use any means available to enforce it. If you have lobbyists in high government spheres defending your particular interests, working successfully to give privilege you above others. If you have exclusive concessions or subsidies, then you don’t deserve my respect, you’re a bureaucrat, you’re a manipulator, and you don’t deserve any of your wealth. Damn you and all those like you.

I’m not sure where the fishsticks the author is going with this either. I can, however, comment on a point of yours – rich people being bad. No, a rich person doesn’t necessarily have to be bad. It is, however, a given that most people who become rich managed to do so by prioritizing wealth over most secondary concerns.

You can certainly see a fair share of multimillionaires who have managed to claw their way to the top using unscrupulous means – I’ll blithely assume everyone is familiar with Microsoft’s standard business practices when it came to dealing with potential competitors up until the point where it took a ten-year case and a supreme court ruling to make them stop.
You can also certainly see those very same millionaires, once successful, salving their conscience and repairing their battered public image by making massive donations to charity. Bill Gates today pours more money into charity than the ordinary person would know what to do with.

So is Bill Gates good or bad? The term is relative to start with but we can certainly say that if you needed a financial favour you’d be much better off asking the middle-aged Gates already on top of his fortune than you’d be asking the young hard-assed entrepreneurial Gates still in the process of clawing his way to the top of the pile.

Becoming wealthy often requires you to put your conscience on the back burner. Being wealthy grants you the luxury of indulging what battered pieces of conscience you may have left..

You could use a clichéd expression and state that the motivation for amassing wealth and generally act as a hard-as-nails emotionless bastard while doing so is enforced by society’s rules. Which in the end means, if I hazard a guess as to where the author is heading, means society itself needs to change.

Philosophically speaking it’s very interesting. In practical terms though it means changing human nature altogether. The systems we use are reflections of what people do. If we ever get to the point where every citizen truly becomes impervious to manipulation then even communism might become a viable prospect.

I’ll be waiting for part three, but I’m guessing the “Profit Motive” series will turn out to become an interesting analysis of status quo with the only possible solution requiring impractical circular logic.

In a theoretical anarchistic free market society, then yes, there would be no problem. The problem is that we’ve already been there, and the world we live in today emerged from it. States haven’t always existed — they emerged from certain players amassing too much power, and using it for ill intentions simply because they could. (Also, as I mentioned in the first article, people aren’t always rational, so that kinda breaks the system)

Corporations already exert state-like levels of powers in some parts of the world. If we abolish all states but don’t take measures to curtail the rise of new coercive authorities, we’re back to square one. That’s why I’m trying to reason out a system more naturally inclined towards egalitarianism than the one we have today.

I’ll be going more in-depth about how authority naturally emerges in a future article.

“Also, as I mentioned in the first article, people aren’t always rational, so that kinda breaks the system”

That sort of breaks any system.

If people were acting rationally I bet we could even make Communism work. As is we have a “best-effort” approach using capitalism as a system which takes human flaws into account and is capable of working using flawed components.

However…authority origins aside, a “state” can not accurately be compared to a “corporation” in anything other than certain areas of influence. A Corporation arises based on a hard-cash profit motive. A state arises based on an entirely different power base.

I am very uncomfortable with broad, sweeping, fishsticky assumptions like, “But poor people are rarely poor because they are bad people, and rich people are rarely rich because they are good people; in fact, it’s often the exact opposite,” You’re implying a correlation between income and evilness. So as I become more efficient and experienced at my job, I help bring products/services to market that are, in the end, more affordable/value-added than before. In return, my company pays me more, ergo, I am more evil. I am definitely not following your logic there.

While I can understand arguments like, “if you didn’t have to depend on Big-(Evil?)-House-Man to pay your bills, would you still be working for him?” The answer is, no, probably not, but I can’t at the same time argue that I would be adding as much value to society by sitting around the house, dabbling in programming (a little) and playing video games (a lot) all day.

But let’s say I WAS productive, and I did a service to human-kind by writing a thousand Wikipedia articles. How many people are going to say, “you helped eternally catalog human history on Wikipedia, I’ll do you a solid!” as compared to the number of those who would do Rebecca Black a solid for uploading a hilariously terrible music video that made 500 million people laugh for 3 minutes and proceed to disappear into obscurity 3 weeks later?

The problem isn’t the monetary system at all — even if you replace cash with “solids,” you’ll have the same flaw: People will inherently put value on things that are irrelevant to the betterment of human-kind. You can’t blame the profitable for being so, especially when we are the ones throwing money at them.

“People will inherently put value on things that are irrelevant to the betterment of human-kind. You can’t blame the profitable for being so, especially when we are the ones throwing money at them.”

Not to mention the inherent problem of hyper-inflation/deflation. A “solid” has a variable best-before date as well as a “value” which can fluctuate between infinites depending on who is requesting it and when. What’s valuable to you right here and now may be worthless an hour later. So with a value of a “solid” usually being assigned after-the-fact even “hard” cash looks like a tempting alternative.

I prefer the wrong appriciation of lolcats to be less of a problem compared to dumping toxic waste or financing wars.
I’d like to see the government fund Iraq with IOU’s :P

The whole point here is to find a better reward system. Accumulation of money really sucks at giving positive feedback for good and moral behaviour, be it people or companies. Why don’t you “Status quo” people try to come up with even better solutions instead of bashing those who tries to find systems to solve the problems of our time.

And of course he doesn’t mean all rich people are bad and all poor people are super nice but just had bad luck or something… are you dense?!

I’m not sure if this reply was directed at me, though I have a feeling it was, so I’ll respond.

1) Being that the US government is massively in debt, they DID fund the Iraq war with IOUs. Not sure if you were trying to be cute there, but I did want to point that out.

2) The number of companies dumping toxic waste (or committing similar atrocities) is small, and getting smaller every day as we increase transparency (the author mentioned this in Part 1). Either way, that’s irrelevant. What’s relevant is that people are throwing their money at companies that do bad things. If money were replaced by anything else (“solids,” or whatever) people would be throwing their “solids” at said company as well.

I am not at all opposed to alternatives, but replacing dollars for “solids” isn’t it. The problem is in people’s own lack of due-diligence and their inability to turn their beliefs into action… or inaction.

3) I deliberately did not bring the word “luck” into this because I firmly believe that cases of “luck” are the minority when it comes to poverty and wealth. I would argue that there are a few martyr-like poor people who put worldly posessions and endeavors behind them and live impoverished, humble lives. Likewise, I believe there are few truly evil capitalists who didn’t at the very least contribute *something* to society to gain their wealth. Since there’s no true measure of good and evil except our perception, neither one of us can conclusively prove the other wrong, unfortunately. That would make policy-crafting a whole lot easier.

Seemed to me the point of this was about whether you can create a monetary system which rewards better behaviour than the one we have at the moment, not whether the poor are good or the rich bad. Without getting into the virtues or otherwise of particular individuals rich and poor, the fact is that a whole lot of corruption, war, addiction, exploitation and theft is going on under the system we have at the moment. I applaud all attempts to find alternatives to that system. Ripple sounds interesting.

I think a good think with a free market, is that if you want to profit(like the man cutting grass does) you have to do it in service of others.

Why assume that rich people must have lied, cheated and stolen their wealth? If so, one should deal with that problem and not try to detract honest ways of getting rich.

If some guy has a lot of money, you still don’t have to cut his grass. You don’t need exactly that man’s money to buy food. In a free market you do not even need his kind of money to buy food. Today of course, only one kind of money is permitted in transactions, as all others are unusable because of VAT and other regulations favoring government monopoly money. If nobody deals with him, he has no power over them. If this man was instantly eliminated along with his money from the face of the earth, you would have no complaints with him at all, but since he exists and is entering into a trade, you hate on him for it just because you have some perceptions on his worth.

Isn’t it so that the profit motive actually derives from our contemporary debt and interest based money system where there’s never enough money to pay all the debt (i.e. constant competition of scarce currency)? Or are you suggesting it’s some fanciful human nature to maximize your own gain and fuck everyone else?

About The Author

Zacqary is an activist in the New York Pirate Party, where his official title is "Cat Herder." He is an open source game developer, and the Chief Executive Plankhead of Plankhead, a free culture arts collective. Despite believing that money is a superfluous social construct, he has a Gittip profile.